Bayer sets aside 84.3 billion for seed company Monsanto, quarterly results show huge loss

 

German chemical giant Bayer announced its third-quarter results, showing the group paid a heavy price for acquiring US seed supplier Monsanto, resulting in a loss before tax and interest of 9.4 billion euros (HK$85.764 billion) during the quarter; the net loss for the period was 2.7 billion euros, higher than analysts' expectations of 1 billion euros.

 

According to the announcement, due to weak farmer demand for Monsanto's products, Bayer made a fair value impairment provision and had to write off 9.25 billion euros (HK$84.396 billion). In addition, Bayer made a further provision of 750 million US dollars in legal costs for lawsuits alleging that Roundup, the herbicide produced by Monsanto, causes cancer. Bayer acquired Monsanto in 2018 for 63 billion US dollars (HK$491.4 billion).

 

The provision did not surprise the market, as Bayer had already disclosed in September that it needed to make a fair value impairment provision. Bayer Chief Financial Officer Wolfgang Nickl said that weak demand for US agricultural products was due not only to the impact of the COVID-19 pandemic, but also to weak biofuel prices, and the provision was also related to exchange rate changes.

 

Regarding the cancer lawsuits, Bayer reached settlement agreements in principle with 88,500 of the 125,000 plaintiffs, involving 11 billion US dollars in compensation; this additional provision of 750 million US dollars mainly reflects legal costs being higher than expected.